Smart-grid revenues in Australia will shrink to $260 million in 2016 from $400 million in 2012 because of concern about the investment case and disappointing tests of the technologies, according to new research from Frost & Sullivan.

Although several electricity distribution utilities are deploying smart grids, many are reluctant to make substantial investments because of the lack of specific payback periods and the unsatisfactory performances of smart-grid technologies in real application environments, says the market-research company.

In addition, it says, the ease with which meter readings can be read and controlled has created a level of discomfort among consumers that can only be addressed through intensive consumer education about smart-grid benefits.

Those factors are likely to restrict the smart grid’s growth in Australia, although Frost & Sullivan expects demand to pick up beyond 2015 as power companies experiment and improve rollout results.

“The disaggregated structure of the Australian power transmission, distribution and retail industries poses a challenge for smart grid deployment,” said Sarah Wang, a senior consultant with Frost & Sullivan. “While power distribution companies owned by the state governments actively encourage consumers to reduce peaks in energy demand, privately owned retail companies build peaking generators to meet energy demand, thus inhibiting the full utilization of smart grids.”

Further inhibitors include the high initial costs of deploying advanced metering infrastructure (AMI) smart grids, as well as regulatory hesitation in approving cost-reflective-tariff schemes.

Challenges encountered during previous rollouts, and the unclear business cases in some instances, have delayed approvals for proposed projects, but Frost & Sullivan says that participants are trying to get these delayed projects back on track by focusing on demand management and the active involvement of consumers.

The company also warns that there is no one-size-fits-all solution when it comes to smart grids.

“Vendors must collaborate closely with utilities and actively experiment with various solutions, installing sensors and monitors at substation transformers and poles,” said Wang. “Resorting to pay-as-you-go meters instead of selling off-the-shelf solutions is another option.”